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Are Taiwanese Chip Giants Passing Crushing Tariff Costs to US Consumers?
A potential 100% tariff on imported semiconductors has created significant uncertainty in the global tech industry. Proposed by U.S. President Donald Trump, this measure aims to encourage chip manufacturing within the United States.
The core idea is simple: build your computer chips in America, and you won’t face the tax. For companies that continue to import chips, the cost could double overnight. This leaves many, especially Taiwan’s world-leading chip firms, at a critical crossroads. The biggest question for American businesses and consumers is a serious one: who will ultimately pay for this massive new cost?
The immediate impact of such a policy would not be felt equally by all companies. The key to avoiding the tariff lies in having a significant manufacturing presence in the U.S..
The Power of Investing in America
Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, is in a strong position. The company has already made huge investments in American facilities, likely protecting it from the proposed tariffs. TSMC has committed a staggering $165 billion to its operations in Arizona. This massive investment includes:
- Multiple cutting-edge fabrication plants, or “fabs.”
- Facilities for advanced packaging and a research and development center.
- The production of some of the world’s most advanced chips on American soil, including 4-nanometer and 2-nanometer technology.
By making such a deep financial commitment to the U.S. before the tariffs were even announced, TSMC has aligned itself with the policy’s goals. This strategic decision means the company and its major clients, which include giants like Apple and Nvidia, will likely be exempt from the crippling 100% levy.
A Difficult Choice for Other Firms
However, the situation is drastically different for other Taiwanese chip companies, especially those that produce “mature process” chips. These are the slightly older, but still essential, chips that power countless everyday devices. Companies like United Microelectronics (UMC) have not invested in building their own U.S. factories.
Their hesitation is understandable. The U.S. already has strong domestic players in the mature chip space, such as Texas Instruments. For a company like UMC, building a new factory in the U.S. would mean entering a highly competitive market, making the investment far less attractive.
This is where the tariff becomes a powerful threat. If these firms do not have U.S. factories, they face a terrible choice. They can either absorb the 100% cost increase, which would destroy their profit margins, or they can pass that cost along.
The industry consensus is clear: the costs will be pushed to the customer. Since most of Taiwan’s chips are sold to American companies, this means U.S. buyers would face dramatically higher prices for essential components. Ultimately, this could lead to higher prices for American consumers on everything from cars to washing machines.
A Path Through Partnership
There is, however, a middle ground. UMC is currently in a strategic collaboration with the American company Intel. Together, they are developing a new 12-nanometer process node at Intel’s existing facilities in Arizona.
This partnership allows UMC to have a U.S. manufacturing footprint without the immense cost and risk of building its own factory from scratch. It provides a potential path to tariff exemption while adapting to the new landscape.
Even with these strategies, the industry remains in a “wait and see” mode. The president’s announcement was not an official tariff declaration and lacked critical details. Key questions remain unanswered, creating a cloud of uncertainty.
For instance, it is not clear how much U.S. manufacturing a company must commit to in order to qualify for an exemption, or if the tariffs would apply only to individual chips or to finished electronic products that contain them. Until these details are confirmed, Taiwanese chipmakers and their American customers can only draft response plans and hope for clarity.